The envy of rivals is the highest compliment that is paid to political success. Since George Osborne delivered his budget to a rapturous reception from Tory MPs, Boris Johnson has been wearing the tortured smile of a man who has swallowed a wasp and is trying to look happy about it. He was compelled to laugh along when he was the butt of a joke in the chancellor’s speech. He had to pretend to approve when a national living wage, one of his pet causes, was appropriated by his competitor for the Tory crown, as the chancellor sought to divert attention from the scythe he was taking to in-work benefits. Overall, the backbencher for Uxbridge and the rest of the Tory party were given a masterclass in what a powerful chancellor can do to disorient his external opponents, eclipse his internal enemies, set the political weather and promote himself.
Interestingly, the green-eyed monster can also be glimpsed at Number 10. Friends of the prime minister sound a little put out that so many plaudits have been showered on the next-door neighbour. They want to establish some ownership of the budget for the prime minister. One of his allies is keen for it to be known that “they built it together from the ground up”. David Cameron may also be getting irritated when he hears people say – and this is often said by ministers – that the next-door neighbour is the most powerful man in government.
The budget demonstrated the enormous clout of a long-serving chancellor when he wields the imperial dominance of the Treasury over the rest of Whitehall. From education to the environment, defence to welfare, he roamed across the waterfront of government. A telling example is the shotgun way in which the BBC was forced to take on the cost of free TV licences. The new culture secretary, John Whittingdale, was bounced as well. He was given little notice of the decision and no chance to demur. Says a person highly familiar with events: “George told John it was going to happen. End of story.”
I used to think that Mr Osborne’s ambitions were capped at being a powerful chancellor, not least because he previously gave the impression that he thought Number 10 was beyond his reach. His friends would often say that he recognised that it was his role to be the Treasury technician to David Cameron’s showman. That has clearly changed. He can now see a path for himself to Number 10. And I think we can put a date on the moment when the ambition crystallised. It was 8 May. On the day before, he was not confident that his party would win a parliamentary majority – he sent a stream of texts to Nick Clegg urging him to do another coalition deal with the Tories. If the Conservatives had lost the election, George Osborne would have been toast. Had they failed to secure a parliamentary majority for a second time in a row, that would have been a failure with which he would have been indelibly associated. When they looked for their next leader, the Tories would have sought a change candidate. It was the winning of a majority that has burnished him as the joint architect of a successful project and made it more probable that the Tories will choose the continuity candidate to follow David Cameron.
The overarching aim of that project is to emulate the electoral achievements of Thatcherism and Blairism. In their different ways, those election hat-trick winners dominated politics by redefining what it means to be on the centre ground and then commanding that territory. To that end, the budget was laced with challenges to the Labour party when the opposition is at its most vulnerable. The design is to force Labour to choose between conceding ground to the Tories or becoming trapped in leftwing positions from which it can’t be elected.
Squeezing the size of the state is integral to this project, but the chancellor has always been a bit more pragmatic about how rapidly he gets there than either he or his opponents have liked to acknowledge. He also knows that the Tories’ election victory was not impressive and they won not because they were loved, but because Labour was feared. So part of his purpose was to suggest that there is more to him than just the flinty fiscal hawk who relishes axing things.
I predicted a fortnight ago that he would soften the profile of the spending cuts over this parliament – and he duly did. He has put back his estimate of when he will finally clear the deficit by a year. That still entails a serious squeeze, but the process will be slower and take longer. Ironically, the future path of spending now looks much more like the one recommended to the electorate by the poor old Lib Dems. Which, you will recall, he ridiculed as reckless during the election campaign. A smoother path to deficit reduction should also mean less bloody battles with cabinet colleagues whose support he will want in the succession.
He has also put more of the burden of deficit reduction on taxation, an unacknowledged concession to critics who have long said he placed too much emphasis on cuts. The net tax take will go up by more than £6bn a year by 2020, something that Mr Osborne forgot to mention during the election campaign or in his budget speech. Funny that. The taxes he cut were the headline ones that everyone understands. The taxes he put up were generally more obscure. That’s an old trick straight out of the Gordon Brown playbook. The rises included a new levy on bank profits and higher taxes on people who receive a lot of dividend income – two ideas that he vetoed in the last parliament when they were proposed by his then Lib Dem deputy, Danny Alexander.
Ruthless poaching of useful or popular ideas from opponents was one of the hallmarks of this budget. In fact, I have never seen it done so shamelessly. When Ed Miliband proposed a modest spot of state intervention to freeze energy prices and cap rents, the Tories denounced him as a crazed Marxist. Now the chancellor plans a charge on employers to fund more apprenticeships and to sequester the private assets of housing associations. When the Labour leader proposed to increase the minimum wage to £8 an hour, the Tories trashed him as Red Ed.
Now the chancellor says he’ll raise Labour’s election promise and make it £9 an hour by 2020. This is a higher and re-badged minimum wage. It is not a “living wage” in the sense that the groups that have campaigned for one recognise. Nor does it compensate for the slashing of tax credits. The chancellor’s rhetoric about the Tories becoming “the party of working people” will sound very hollow to the 13 million people left the poorer. We do not have to swallow all his spin to see that it was nevertheless a very artful piece of politics.
Labour is quarrelling with itself about how to respond to the budget. His own party is delirious. Most of the media is beguiled. As of this weekend, it has never looked likelier that George Osborne will be the next prime minister.
Likelier, but not certain. Between him and the prize, there are several serious hurdles. One is Europe. His chances of becoming prime minister and then leading the Tories to another victory in 2020 are heavily contingent on David Cameron managing to get the Tory party through the referendum without doing irreparable damage to itself. Then there is the tension between the strategic electoral goal of repositioning the Tories as a “one nation” party governing for the majority and the atavistic desire of Conservatives to look after their own whatever the cost in social justice. A true meritocrat would not have prioritised an inheritance tax windfall for the heirs of the propertied wealthy while removing support for bright students from poorer homes.
Boris hasn’t gone away. The chancellor is never going to be competitive with the mayor of London when it comes to that mysterious electoral aphrodisiac called charisma. His answer will be to invite the Tory party to compare their curricula vitae. One has been a character mayor of the capital with limited powers. The other is, as he will tell the story to his party, the mastermind of a project to permanently restore the Tories as the dominant party of British politics.
The greatest peril to George Osborne’s ambitions is time. His reputation ultimately turns on what happens to the economy, something that no chancellor, however omniscient he may pretend to be, can entirely predict. I know it may not feel that way to many people, but the current recovery is getting quite old in the tooth. World stock markets have been in a bull phase for an above-average duration. The IMF has recently been worrying that global growth is stuttering. The wild bungee jumping of the Chinese stock market and the crisis over Greece are reminders of the power of events to derail the best-laid plans.
A chancellor can be clever at the politics – and this one is as sly as a den of foxes – but his fortunes will boom and bust with the economic cycle. To achieve his ultimate ambition, George Osborne needs to get his furniture moved across to Number 10 before the next downturn comes knocking.
